Dear Gary,
I am a single mom raising two beautiful girls. Problem: I am a high school
teacher that already works a side job at a Junior College and I clean two houses
for extra income; however, I am still $1,000 behind each month. Yes, my ex pays
child support, but I can't seem to make ends meet. I am not living
extravagantly; I really just need support from something. I don't think I could
be approved for governmental assistance because of my career. Do you have any
suggestions?
Maria

Good question! Basically Maria is spending more money than she takes in. That's
a common problem. Let's see if we can't find a solution for her and others in a
similar situation.

Maria's options are few. Increase her income. Reduce her expenses. Or some
combination of the two. We'll begin by looking at her income.

We don't know how much she makes so we'll need to make some assumptions.
According to Salary.com the median salary for a high school teacher is $48,805.

If we look at the U.S. Statistical Abstract for 2006, we see that 69% of all
households had income of less than $50,000 in 2003 (the most recent data). If we
add part-time income and child support to her teacher's salary, it would appear
that Maria's income is not the problem. And, she's right that assistance is
unlikely.

So let's look at her spending. Maria didn't say, but if she's falling $1,000
behind each month and her income is over $48,000, it would appear that she's
spending $60,000 or more each year.

How does that compare to the average family? Going back to the Abstract we find
that the average family of three spent $47,406 in 2003. So unless her salary is
significantly below the average, between it, her part-time jobs and child
support she should have enough money to support a reasonable lifestyle.

But, she doesn't have enough money. So where is it going? There are three common
places that family budgets get bent out of shape: housing, food and
transportation.

About one third of all the dollars we spend go to housing. That includes
mortgages and utilities. It's possible that Maria is still living in a house
that she and her ex-husband bought together. In fact, they may have qualified
for the mortgage based on both of their incomes.

Typically it's not possible for the ex-wife to continue living in the same house
after a divorce. The house payment and utilities are too high. Maria should
limit her housing expenses to no more than 35% of her budget. Forty percent is
an absolute maximum. If she's above those levels she'll need to move to less
expensive housing.

The next potentially troublesome area is her automobile. A little less than 20%
of the average consumer's money goes to transportation including gas and
maintenance. Just like housing, if Maria finds that she's spending too much on
her vehicle, she'll need to trade-down to something more affordable.

The final big area of routine expenses is food. We spend about 1/8th of our
money on groceries and foods prepared outside the home. This is often an area
that ruins budgets. Especially for single parents. The reason is simple. Maria's
schedule doesn't leave her much time to cook. It's only normal that she'd use
many 'convenience foods' as well as fast food take-out to feed her family. But,
that can get expensive if you do it day after day.

How can she trim her food budget? There are a variety of tools she can learn
about. Among them is a 'price book' that will help her track low prices.
'Freezer meals' can put a healthy, homecooked meal on the table in minutes at a
fraction of fast food prices. She might even want to learn about forming a
dinner swapping club. That's where you cook one meal for your family and
additional meals (same menu) for the families of your swap partners. They do the
same for you.

The only way Maria will know if any of these areas are in trouble is to do some
calculations with her checkbook and credit card statements. Budget software can
help her tally the expenses.

There is one other possible budget buster. That's paying off past debts. If
Maria owed $10,000 in credit card debt, her minimum payment would be
approximately $400 per month. She could try to roll the debt into lower cost
home equity debt or she might want to contact a credit counselor about setting
up a repayment plan.

Maria will probably find that there's no one solution to her problem. She'll
need to make a number of changes to close the $1,000 a month gap.

If you're in a similar situation you can check how your income and expenses
compare to the averages by doing a web search on "U.S. Statistical Abstract".
Once you get to the Abstract, look for the section on "Income, Expenditures, and
Wealth" for specific tables. For instance, the one on income came from Table
673.

Gary Foreman is a former financial planner who currently edits
The Dollar Stretcher.com website and newsletters. If you'd like to stretch your day or your
dollar visit today!